Patterson: Emergency manager for Detroit the only option left for Snyder (with video)

An emergency manager to run Detroit’s finances is far preferable for the suburbs surrounding the state’s largest city than a municipal bankruptcy, says Oakland County Executive L. Brooks Patterson.

Patterson said Friday that an appointment of a manager by Gov. Rick Snyder to run Detroit would be viewed positively by the ratings agencies who grade municipal finances, and have no effect on the suburbs.

“They like it, they think it’s a plus,” Patterson said. “Now you have somebody in charge who will make the tough decisions, isn’t worried about the politics and will come in and begin to reduce the operating costs and the deficits that are a yearly event for Detroit.

“When they come in, Wall Street thinks that’s a positive event and would not be threatening to us,” he said.

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Snyder said Thursday it would be at least a week before he determines whether an emergency manager is necessary for Detroit.

A state review team concluded earlier this week that Detroit has a financial emergency and no plan to deal with it. A consent agreement with the state also has not produced the desired results.

Patterson has long been protective and effusive of the county’s AAA bond rating and the relatively low borrowing costs it brings, primarily for local infrastructure projects.

Should Detroit be allowed to slip financially to a point where bankruptcy is the only option, virtually all southern Michigan communities would see their bond ratings fall, he said.

“It would have a negative effect on, I think, every community south of Lansing,” Patterson said. “The whole bottom half of the state would have their ratings dropped one notch, in our case from AAA to AA+.”

Patterson says there’s really no other option left except to appoint an emergency manager.

“I think he’s got one option and that’s the emergency manager,” Patterson said, noting a consent agreement with the city didn’t work. “Why would you sign another agreement that they can go ahead and violate over time?”

“I think they have to come in with an emergency manager and do for Detroit what (Lou) Schimmel did for Pontiac,” Patterson said.

Schimmel is Pontiac’s third manager. State-appointed managers first took over Pontiac finances in March 2009.

Since then, the city has contracted out police and fire service, reduced city staff and sold off its wastewater treatment plant in an attempt to get city finances back in the black.

Whether a state-appointed municipal manager can stave off a municipal bankruptcy in Detroit is another issue, and perhaps why it may be difficult to find one willing to tackle the huge financial issues that face the city.

Patterson predicted a state-appointed manager will follow a path similar to emergency managers in Pontiac.

“They will sell off, as we did in Pontiac,” he said. “Detroit has a lot of assets like that that can easily be monetized and the money applied to their debt.”

But like Pontiac, going on its fourth years with a state-appointed manager, sorting out Detroit’s finances won’t happen overnight.

“They have $16.2 billion in legacy costs, and that’s going to take a lifetime to pay off,” Patterson said. “But you have to start.”

Patterson noted Oakland County is debt-free of legacy costs for retiree health and pensions. But, he said, the county has also been making payments for 24 years to get there.